Rallis India Ltd Research Report - 29th Apr 2016

For 4QFY2016, Rallis India (Rallis) posted sales of Rs342cr V/s Rs315cr in
4QFY2015, a growth of 8.6% yoy. The same was driven by higher offtake in
export orders which have been getting differed since the past two quarters due to
a challenging environment faced by global companies. Domestic growth
continued to remain muted during the quarter. On the operating front, the gross
margin came in at 43.3% V/s 47.0% in 3QFY2015, leading the OPM for the
quarter to decline to 10.4% V/s 12.3% in 3QFY2015. In spite of the same, the
PAT came in at Rs32cr V/s Rs21cr in 3QFY2015, a growth of 51.3% yoy. This was
on back of the depreciation dipping by 55.4% yoy and a 132.1% yoy growth in
other income (which came in at Rs15cr V/s Rs6cr in 4QFY2015). We remain Neutral
on the stock.
Margins disappoint: Company posted a robust growth in the top-line of 8.6% yoy
to Rs342cr, mainly driven by exports. On the operating front, the gross margin for
the quarter came in at 43.3% V/s 47.0% in 4QFY2015, while the OPM came in
at 10.4% V/s 12.3% in 4QFY2015. The PAT came in at Rs32cr V/s Rs21cr in
4QFY2015, posting a growth of 51.3% yoy which is in spite of a contraction in
the OPM. The PAT was aided by a 55.4% yoy dip in depreciation and 132.1% yoy
growth in other income (which came in at Rs15cr V/s Rs6cr in 4QFY2015).
Outlook and valuation: For FY2016-18E, we expect a CAGR of 15.0% and
22.3% in net sales and profit, respectively, with recovery expected in FY2017E. At
the current levels, the stock is trading at a fair valuation of 17.9x its FY2018E EPS.
Hence, we maintain our Neutral recommendation on the stock.